How to start cosmetic business

 How to start a cosmetic business at home

Thanks to the rapidly growing indie, natural beauty sector, more and more entrepreneurs are learning how to start a cosmetics business at home. The global natural and organic beauty market was valued at US$37 billion in 2022 and is set to more than double to US$85 billion by the end of 2032, growing at a CAGR of approximately 9.5% from 2023-2032(i).

With this kind of growth predicted, it’s exciting to see independent beauty entrepreneurs leapfrogging the sector by empowering themselves to become organic formulators. They’re not only learning how to design unique natural skincare and haircare, but how to turn their passion for botanical ingredients into something bigger than themselves. They’re creating high-performance and truly innovative natural and organic beauty products that are taking the traditional beauty business by storm.

If a career change into the natural beauty sector excites you, we’re here to help you begin your journey as a beauty entrepreneur by summarizing the 7 key steps you need to take to start a cosmetic business at home.

In this article, we will discuss the following topics:

1.Step 1 – Think Like a Beauty Entrepreneur

2.Step 2 – Build a strong brand for your beauty business

3.Step 3 – Decide on your business model and manufacturing strategy

4.Step 4 – Organise your finances

5.Step 5 – Create your retail strategy

6.Step 6 – Create a strong PR, marketing and sales strategy

7.Step 7 – Write Your Beauty Business Plan

Step 1 – Think Like a Beauty Entrepreneur

The first step to becoming a successful beauty entrepreneur is to work on yourself. Setting your mindset right is crucial to starting your journey to starting a beauty product business.

The most important factor in the success of your beauty brand is you. We know from experience that the biggest obstacle to starting a beauty brand can be you. As you start to go through all the steps needed to create a successful beauty brand, you’ll realize that starting your own makeup, haircare or skincare business will be one of the hardest and yet most rewarding steps you’ll ever take, which means you need to be prepared.

The way you tackle any challenges in your beauty brand will determine your overall business success – and with that, developing a positive and growth mindset, as well as being able to create a clear vision for your business, is essential.

Step 2 – Build a strong brand for your beauty business

Branding is the act of creating a story that creates an emotional response with your target market. It’s very easy to think that your brand is ‘just’ your logo, but your beauty brand is much bigger than that. Your brand means nothing if there is no context of what you stand for. Every part of your beauty brand, your formulations, packaging, website, marketing and visuals must work together and create an emotional response from your target customers so that they truly connect with your brand.

Too many brand owners create a great website or feel their beauty products are better formulations than their competitors, and think they can then relax and wait for their customers to come to them. This is the wrong way: you need to attract your customers to your beauty brand through a well-defined brand identity and then create a rich, sensory experience that includes visual, tactile, smell (olfactory), audible, emotional and even potentially taste (gustatory) branding (think lip balm, for example!).

Ultimately, a successful beauty brand is one that changes customers' lives, even if it's in a small way. You have to decide what changing lives means to you, and channel that passion into your beauty business. Listen to our podcast with Formula Botanica graduate Sandra Velasquez, founder of Mexican-heritage brand Nopalera. Sandra had a clear purpose for her brand and offers inspiration and tips to aspiring beauty entrepreneurs.

Step 3 – Decide on your business model and manufacturing strategy

You probably already have an idea of how much money you want to spend to start your cosmetic business at home and how big you want it to be. However, you probably haven’t thought about what’s really required to get to that point.

You’ll need to choose the right business model for your needs and then choose a manufacturing model that suits your business, as these two decisions go hand in hand. Ultimately, you need to understand how you’ll approach your manufacturing strategy before you can decide how many units you’re going to make. Having an end goal in mind is important for deciding your overall business plan, how much capital you want to raise and how you’ll run your day-to-day operations.

Deciding on your business model requires you to think deeply and ask yourself some tough questions, such as 'How hard do I want to work?' or 'How much of my personal savings do I want to invest in this business?'

Once you decide which business model best suits your dreams, you can decide to change your business model at any time. You can grow your business to become bigger, or you can scale it down to become smaller. The deciding factor is you, because you know what works best for your personal circumstances and your business. However, you do need to have a plan about where you want to take your beauty brand.

For more information on budgeting and planning your beauty business, as well as graduate case studies, see our article:

Step 4 – Organise your finances

You won't be able to run a successful beauty brand without a firm grasp on financial matters. From the very beginning, you need to make sure you set up your business properly and keep your finances under control. It's not a good idea to think that just because you're going to start a cosmetic business at home, you can't think like a business from day one.

If you've never run a home-based business before, financial planning can seem overwhelming and detailed. However, without organizing your money flow, you can imagine things will quickly get out of control. The key to success is knowing how to bring in cash, where and when to spend money, and how to make sure everything is balanced. As the founder of your beauty brand, you need to have an up-to-date overview of the money in your business at any time, so financial planning will become a firm part of your daily and weekly routine.

Now that you've created a financial plan for your beauty brand, it's time to take a look at the products you're going to sell. First, look at how much you cost to produce those products - in other words, how much does it cost you to make each unit? You should include costs like your ingredients, packaging, labels, and most importantly, your time. If you had to outsource the manufacturing of your beauty products, you'd have to spend money hiring someone to do it - make sure you include your labor costs.

Second, pay attention to pricing. When it comes to pricing your own beauty products, this process can really make you question your relationship with money, as you have to start asking your customers to pay a certain price for your brand. However, your pricing is crucial to the overall growth of your business, so you need to be able to develop a positive money mindset. Your profit is crucial to growing your business, affording all your overheads, and being able to reinvest in future stock.

Step 5 – Create your retail strategy

Once you start a home-based cosmetic business, you'll need to decide where you want to sell your beauty products. Will you sell primarily through your website? Will you sell from market stalls? Will you approach high-end retailers to stock your beauty brand? Will you sell through Instagram or spas or Amazon?

There are dozens of retail channels you can choose from. You'll need to decide which channels work best for your cosmetic business. If you want to work with retailers, you'll first need to decide which retail category you fit into, such as mass, luxury, etc. It's easy to think that your beauty brand can be sold to anyone, anywhere, but the truth is far from that.

To determine which retail category you fall into, it is extremely important that you get lots of honest feedback about your brand, your formulations, your packaging, and your price points.

We have seen many brands present themselves as luxury brands, with luxury prices, but without luxury branding and a luxury experience. You must be honest with yourself to best position yourself for your market. A successful brand must change many times to get to where it is today. Once you know where to sell your beauty products, you will be in a much stronger position to start a cosmetic business at home. This article has a step-by-step guide to help you craft your retail strategy:

Step 6 – Create a strong PR, marketing and sales strategy

Marketing and selling your beauty products can be one of the hardest parts of starting a cosmetic business at home. You may love formulating more than selling. However, once you incorporate your passion into your beauty business, people will pay attention to what you have to say because they will be able to see how much you believe in your formulas. That passion makes up a big part of your overall marketing and sales strategy because, ultimately, people will buy from you.

Many beauty entrepreneurs now want to sell directly to the consumer. Every single beauty brand needs a digital marketing strategy. It is no longer enough to sell face-to-face or through retail sales. If you want your beauty brand to be successful, you must incorporate digital marketing into the core of your business. You also have to accept that digital marketing will take up a large part of your daily tasks.

To keep track of all these different marketing activities and your overall plan, as well as events and social pages around your new launches or seasonal events, you need to create a marketing calendar to keep yourself organized. All professional beauty brands have a marketing calendar and you should too. A marketing calendar will help you stay consistent and plan your plans for the year ahead so you never run out of ideas.

Step 7 – Write Your Beauty Business Plan

Running a cosmetic business at home requires you to be very organized. You will need a strong business plan that takes you through all the main components of your cosmetic business. Your beauty business plan should include the following topics:

Your beauty brand vision – what do you stand for? Where do you want to take your cosmetic business?

Your beauty products – what are you selling? How do all your products fit into a category?

Your niche and customer – who are you targeting? How will you change their lives?

Your competitors – who else is in your market and how do you stack up against them?

Your manufacturing strategy – how will you make your beauty products? Will you do it yourself or work with a contract manufacturer?

Your retail strategy – where do you plan to sell your beauty products? Will you work primarily with retailers or will you sell primarily direct to consumer?

Your financing – Where will the money come from for your business? Will you use your savings or do you want to take the big step and raise investment?

Your financial forecast – This should include your estimates and forecasts for your beauty business.